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The Business Association Of Indonesia (Apindo) Has Stated That The Current Interest Rate Policy Places Entrepreneurs In A Disadvantageous Position

The business community anticipates a balance between the need for competitive strength and domestic economic growth following Bank Indonesia's (BI) decision to maintain the benchmark interest rate, known as the BI Rate, at 6% during the Board of Governors Meeting (RDG) held on December 17-18, 2024. BI has indicated that this decision aligns with its monetary policy direction aimed at keeping inflation within the target range of 2.5±1% for 2024 and 2025, while also supporting sustainable economic growth. Shinta Widjaja Kamdani, the Chairperson of the Indonesian Employers Association (Apindo), expressed that business actors will consistently respect BI's interest rate policy. "Business actors hope that the BI benchmark interest rate is not solely focused on achieving stability but also balances the need for competitive strength and domestic economic growth," Shinta stated to Bisnis on the evening of December 18, 2024. 

Amidst a decline in market performance, the business sector desires a reduction in the BI interest rate to enhance optimism and gain confidence from the domestic market for economic activities, particularly in consumption and investment. "Essentially, business actors find themselves at a disadvantage if the BI interest rate remains unchanged, as this situation does not sufficiently stimulate market performance, especially with the implementation of a 12% VAT policy," she remarked. 

On the other hand, Shinta believes that a decrease in the interest rate would likely be more conducive to stimulating market performance and the growth of the real sector economy. However, she added that this scenario would only materialize if the exchange rate stability is assured and does not experience significant or rapid depreciation, which could impose new burdens on market performance and confidence. "If the interest rate decreases but the exchange rate continues to plummet, we are not confident that the interest rate reduction will have a sufficiently positive effect on market performance," she noted. According to Shinta, a reduction in the interest rate could signal an increasing deterioration in economic performance. 

Tag: Apindo Business Association Of Indonesia